Q&A: How Banks Can Use Technology to Strengthen SMB Relationships, Pt.1

Technology is reshaping how banks serve small businesses, but not always in ways that deepen relationships. Many financial institutions are still figuring out how to turn digital tools into real value for their SMB clients. In my conversations with bankers and business owners alike, I’ve seen how quickly technology can become either a powerful differentiator or a source of frustration, depending on how it’s applied.

To explore what’s working and where the opportunities lie, I spoke with Mary Kay Schneider, Founder of MK Insights2Action, LLC. With decades of experience in small business banking, Mary Kay offers practical insights on how technology can help banks strengthen relationships, improve risk management, and support SMBs through today’s market disruptions.

Jim Fuhrman: Why is technology critical for small businesses to manage market disruptions through banking services?

Mary Kay Schneider: Certainly, we’ve seen no shortage of market disruptions impacting small businesses—inflation and supply chain disruptions beginning in 2021, recent tariffs and the impact on consumer spending. Of course, disruptions can create opportunities too. Using various tech-enabled banking services, SMBs can address shortfalls in cash flow, reduce risk, offer customers convenient payment options and even improve quality hiring and employee retention.

There are a few examples I can think of: 

• Applying online for a small business loan/line or credit card to have a ready source of working capital or take advantage of longer payment terms than suppliers offer (i.e. 30 days on a credit card vs. potentially only 10 days, depending on the supplier).
• Enabling Positive Pay for both check and ACH payments to reduce the risk of fraud.
• Providing businesses the ability to offer consumer customers BNPL options for certain purchases or subscription services that automatically charge a credit card.
• Offering employees financial wellness benefits including online financial education that can help employees boost their credit score.

JF: How do technological solutions from banks improve SMBs’ ability to handle rising costs and supply chain issues?

MKS: That’s a great question, considering the volatility that we’ve seen impacting material and labor costs over the last few years. Obtaining real-time financial data that is integrated into accounting software allows a business owner to understand the magnitude of rising costs and consider alternate inventory methods, suppliers and labor sources. Utilizing a financial dashboard through the bank’s portal reduces time spent gathering this data, enabling the business owner to more quickly take action. During recent market disruptions, business owners have used this information to consider how and when to pass on cost increases to their customers and/or adjust their cost structures.  Real-Time Payments (RTPs) can be performed 24/7 and allow SMBs to pay vendors globally while offering real-time validation and posting, saving time on manual follow ups.

I recently learned about a differentiated way that a New Jersey bank has helped its customers understand the impact of tariffs for their particular industry and make timely, informed decisions. This bank surveyed 1000 small and middle-market businesses. They used that data to drill down into specific industries and understand their cost structures.  They blended that data with outside sources as well. Then and most importantly, they created a consistent way that their RMs could use these insights to have thoughtful, action-oriented conversations with their customers about their suppliers, labor, pricing and cash flow.

JF: What types of banking technologies should SMBs prioritize to navigate a tightening credit landscape?

MKS: The Federal Reserve has reported that banks have tightened credit approvals over the last few years, so for SMBs, it’s important to prepare for shortfalls and build cash reserves. SMBs benefit by using cash flow forecasting platforms to predict future cash needs based on historical data and real-time inputs. Another suggestion is to set up automatic transfers to a higher-yielding savings account that can be easily accessed if shortfalls persist or opportunities arise. SMBs can improve their balance sheet and profitability by using automated bookkeeping and reconciliation. It helps them generate accurate, timely financial statements to improve their credibility and creditworthiness in obtaining credit approval. SMBs should investigate digital lending platforms that are easy to use, allow saving and returning to complete the application, and decision and fund quickly. Faster funding means speed in placing those funds in productive, profitable purposes.

JF: Which ecommerce and payment technologies can banks provide to support SMB growth in volatile markets?

MKS: Three popular solutions immediately come to mind.

One, merchant processing services can speed up cash availability for business customers and allow cashless operations for the merchant either in a physical or online store, as well as for other types of businesses (i.e. dental offices). A growing need is to provide same-day funding for business checking customers using the bank’s merchant processing; however, few banks offer that. Many SMBs link their external bank account to receive deposits from sales processed through Shopify or Square. Third-party apps or accounting platforms can help bridge the gap between ecommerce and banking.

Two, mobile Remote Deposit Capture (RDC) through mobile banking apps is another important capability that improves cash flow through digitizing and streamlining the entire deposit process. That can speed up check settlement and provide faster access to funds. Additionally, this innovation provides time, place and device convenience and flexibility for SMBs, and that has accelerated usage. 

Three, real-time payments (RTP) instantly transfer and settle funds which can reduce the SMB’s reliance on credit lines/loans and lower interest expenses in this higher rate environment. This technology may be more desirable for SMB’s looking to accelerate receivables, but not necessarily payables. RTPs operate outside of traditional banking hours offering flexibility for the SMB to respond quickly to opportunities or receive/initiate payments anytime.